Latest / Behavioral Economics with Fexingo: Decision Making, Bias, and How People Really Spend
Why Your Brain Treats a Rebate as a Windfall
Why do we spend rebate money more freely than our own cash? In episode 109 of Behavioral Economics with Fexingo, Lucas and Luna examine the 'rebate windfall effect' through the 2009 Cash for Clunkers program. That $3 billion stimulus offered up to $4,500 per trade-in, but consumer data showed people treated the rebate as found money—not a discount. Over 690,000 transactions happened, yet 40% of participants said they bought a more expensive car than they'd planned. Lucas walks through the mental accounting: a dollar in your pocket is frugal, but a dollar from the government…
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